Geopolitical Risk, Climate Risk, and ESG Performance: Evidence from Energy Sector Companies Listed on the Indonesia Stock Exchange
DOI:
https://doi.org/10.46799/adv.v4i8.611Keywords:
Geopolitical Risk, Climate Risk, ESG Performance, Energy Sector, PROPER, GRI, IDX, PLS-SEMAbstract
Energy-sector companies increasingly face simultaneous geopolitical instability and climate-related pressures that may influence corporate sustainability strategies and Environmental, Social, and Governance (ESG) performance. This study aimed to examine the effects of geopolitical risk and climate risk on the ESG performance of energy-sector companies listed on the Indonesia Stock Exchange during 2020–2024. A quantitative explanatory design was employed using panel data from 60 companies, generating 300 firm-year observations selected through purposive sampling. Data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4, supported by bootstrapping, robustness testing, and Multi-Group Analysis. The results showed that geopolitical risk had a significant positive effect on ESG performance (? = 0.082; p = 0.035), while climate risk also had a significant positive effect (? = 0.118; p = 0.001). The model explained 49.7% of the variance in ESG performance, with firm size emerging as the strongest control variable. Multi-Group Analysis indicated that both effects were significant only among non-coal companies, suggesting heterogeneous sectoral responses within the Indonesian energy sector. These findings supported stakeholder and legitimacy perspectives, indicating that increasing external risks may encourage stronger ESG commitments through systematic organizational responses. The study concluded that geopolitical and climate risks should be integrated into corporate sustainability and risk-management strategies.
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